Premises and priorities of our 2025 EU advocacy

1.1 Competitiveness compass (initiative 1, Competitiveness) 

The European Commission introduced the competitiveness compass in January 2025. The compass provides a strategic framework and guides the Commission's activities to promote the EU's competitiveness in 2024–2029. The competitiveness compass builds on the proposals of Mario Draghi’s September 2024 report “The Future of European Competitiveness” and Enrico Letta’s single market report. 

The compass consists of three key pillars that aim to improve the EU’s economy, attract investments and keep Europe as a centre for production: 

1. Closing the innovation gap  

2. A common roadmap for decarbonisation and competitiveness   

3. Improving security and reducing excess dependencies  

The compass is a kind of policy framework, and the related several detailed initiatives and measures for different sectors are still being prepared. The premise of the competitiveness compass is a step in the right direction. From the perspective of the municipalities, it is essential to monitor and influence the contents of the actual initiatives and measures.   

Further information:
Mikko Härkönen, Director of Economic Development and Growth 

The competitiveness compass from a security perspective 

From a security perspective, the aim is to reduce dependencies and create a better internal security of supply within the EU. 

Key aims include: 

• Securing critical raw materials and supply chains 

• Strengthening the energy and defence industry 

• Developing cybersecurity 

In part, the competitiveness compass also strengthens the possibilities of municipalities to get critical substances, supplies and services, especially in market disturbance situations. The objective improves the entire security of supply of the Member States. In influencing the strategy, key elements include enabling direct-award contracts in critical procurements (for example, information security devices and programmes) and strengthening the availability of supplies, substances and components that serve critical infrastructure within the EU’s single market. 

Further information:
Ari Korhonen, Security and Preparedness Specialist 

1.2 Single market strategy (initiative 2, Competitiveness) 

In connection with the proposals of Enrico Letta’s single market report, the EU Commission will publish a horizontal single market strategy in summer 2025. The Commission aims to remove current barriers so that all businesses can fully utilise the scale benefits of the single market. The single market strategy aims to modernise the administrative framework, remove internal barriers and prevent the creation of new barriers. 

From the perspective of the municipalities, the development of the single market is welcome. A functioning single market increases competition and, thus, lowers the price and improves the quality of goods and services. At the same time, increased competition promotes the creation of new innovations and improves the competitiveness of businesses. Local businesses operating within a municipality and region need to prepare for increased competition even in areas traditionally dominated by national or local businesses.  

Further information:
Mikko Härkönen, Director of Economic Development and Growth 

1.3 Simplification of regulation (initiatives 3-5, Simplification) 

The EU must invest in its strengths to enhance Europe’s competitiveness on the global level. We are lagging behind our biggest competitors, the USA and China, in too many fields. 

We’ve seen that there are many structural barriers hindering competitiveness, and there’s a willingness to address them. The way to achieve this aim is by simplifying regulation and enhancing implementation.  

The Commission is proposing the Omnibus package of measures for a gradual progression towards easing the burden of regulation and simplifying it. 

The Commission strongly aims to simplify regulation as a means of making investments easier.  

During the third quarter of the year, the intention is to put together a proposal for a funding framework that would cover several years. It will also aim to simplify the funding programmes for the next term.  

The Commission work programme also strongly emphasises efficient implementation. Most EU regulation is implemented on the local level, and the aim is to invest in implementation dialogue between the Commission and stakeholders. 

The Association of Finnish Cities and Municipalities is in favour of simplifying EU regulation and curbing both the regulation flood and reporting.  Smoother permit processes benefit everyone, but we cannot overlook the required resourcing. Regulation implementation should have national leeway, and the Commission should not set guidelines that are too strict or limiting for its implementation. 

The AFCM favours focusing on the implementation of existing legislation instead of introducing new legislation. The support needs for the implementation should be assessed together with the municipalities and other implementers. Confirmed implementation cannot mean increased reporting obligations and other administrative burdens. 

Further information:
Ulla Karvo, EU Affairs Manager 

1.4 EU’s Sustainable Finance Disclosure Regulation (initiative 6, Simplification) 

The EU’s sustainable finance regulation directs the flow of green transition financing and consists of the Taxonomy Regulation, Corporate Sustainability Reporting Directive (CSRD) and Sustainable Finance Disclosure Regulation (SFDR). 

Under the SFDR, financial market participants (credit institutions, investment firms, insurance undertakings) have an obligation to disclose both product and company-specific information regarding aspects of sustainability. In practice, this means that they publish the principles behind their consideration of sustainability risks and information about the consideration of the adverse sustainability impacts resulting from their own investment decisions. The minimum requirements also include an obligation to disclose the level to which sustainability risks were considered for any financial product. 

Should the revision intended by the initiative presented in the Commission work programme only concern the last part, the impact on municipal actors will be restricted to the quality and quantity of information received on financial and investment products. If, however, the revision also includes the other proposed parts, information that is likely to benefit municipalities will increase and become more detailed. At the same time, we must ensure that the potentially increasing obligations of the municipal sector to collect and report information are appropriate. 

Further information:
Jari Vaine, Senior Adviser 

1.5 European Business Wallet (initiative 8, Simplification) 

The aim of eIDAS, and the EUDI wallet (European Digital Identity) to be implemented alongside it in all Member States, is to ease online and local access both nationally and across borders in the EU. One goal is to streamline and enhance services, by enabling citizens to use the EUDI wallet to share their information (electronic attribute certificates) with different parties.  

The EUDI wallet, if successful, may create a new means of accessing services, while minimising, for example, any unneccessary access. It is important to invest in the development of and civic communication regarding eIDAS and the EUDI wallet (EUDI is voluntary for citizens) and finalise the essential aspects of it before promoting another similar solution. Even if the wallet user is a juridical person, the solutions are similar, so EUDI solutions should be utilised and harmonised as far as possible instead of developing something entirely new. 

Further information:
Jaana Jormanainen, Senior Adviser 

1.6 Clean Industrial Deal CID and industry low carbon promotion (initiatives 9-10, Competitiveness) 

The EU is to become a decarbonised economy by 2050 with the help of CID. There is a desire to accelerate industry decarbonisation while ensuring predictability and competitiveness for businesses and investors. CID focuses mainly on two sectors: energy-intensive industries and the clean-tech sector.  

The recognised requirements for success are affordable energy, the demand for clean products, financing of the clean transition and circularity and access to materials. The actions must take place on the global level and the workforce must have the necessary skills. 

Competitiveness is created and investments are often made locally. Municipalities play a key role in, for example, facilitating the location of industry through zoning and the required infrastructure. Municipalities also function as permit-issuing and supervising authorities for the majority of projects. All aspects of the clean transition from emissions to biodiversity and security of supply are weighed as part of the municipalities’ regional development task, environmental protection responsibility and other mandatory duties. It is important that municipalities are included in the dialogue within the implementation of the clean industrial deal and drafting of the Industrial Decarbonisation Accelerator Act.  

The Association of Finnish Cities and Municipalities emphasises that it must be considered a framework condition that the stipulations on zoning fall under national jurisdiction and they should, per se, be excluded from future potentially binding EU regulation.  

The measures and conditions for moving towards carbon neutrality are different at different locations in Europe.  

It has not been considered functional, in Finland, to establish different acceleration or special areas. In such areas, environmental impacts, for example, will need to be preliminarily assessed.  

Easing the administrative burden of businesses should not lead to an increase in measures for public authorities. The Association of Finnish Cities and Municipalities views the investments into the digitalisation of the activities of the authorities, the securing of their resources and the adjustment of permit procedure payments to better cover accrued expenses as positive actions.  

As far as energy production is concerned, renewable hydrogen seems to be a key element, but its production is largely still in its infancy.  

Further information:
Marko Nurmikolu, Senior Legal Counsel
Vesa Peltola, Energy Adviser 

Action plan for affordable energy (Initiative 9) 

The aim of the Action plan for affordable energy (published 26 February 2025) is to lower end-user energy costs while moving towards a low-carbon economy  

• by speeding up clean energy roll-out and electrification  

• by creating a functional internal energy market within the EU through the interconnection of energy networks 

• by improving energy efficiency and reducing dependency on fossil fuels.  

Further information:
Vesa Peltola, Energy Adviser 

1.7. Plan for a Savings and Investment Union (Initiative 12, Competitiveness) 

The Commission work programme initiative includes a plan to expand the capital markets union and banking union to become a savings and investment union. 

The initiative aims to promote investments, economic growth, employment and sustainable public finances. The functionality and prerequisites of the financial markets will also play a role. 

From the perspective of Finnish municipalities and regional industrial policy, functional capital markets as well as a healthy banking sector are important. The capital markets union has included notions about joint debt. The Association of Finnish Cities and Municipalities has reservations about joint debt as it may have negative impacts on credit ratings and financing costs. 

The aim of the new initiative is to enhance the functionality and impact of the capital markets and banking union. One key approach is to increase the return on the savings of depositors and create new investment and financing options, particularly for SMEs and innovative companies. 

The creation of new profit, investment and financing opportunities is, in itself, commendable. The more detailed impacts depend on how the measures and their targets are defined. It should be noted that the content of the initiative indicates a radical and far-reaching change in the operational culture of financial markets, the flow of money, risk creation and management and, most likely, the business and profit logics of financial institutions that accept savings deposits in particular. The readiness of depositors to adapt to these changes should also be surveyed. 

A more detailed evaluation of the initiative requires a comprehensive impact assessment by sector, on the national and Union level. 

Further information:
Jari Vaine, Senior Adviser 

1.8. Bioeconomy strategy (Initiative 17, Competitiveness) 

Taking bioeconomy under re-examination in the Commission work programme is a good thing. Bioeconomy should be viewed as larger than just the circular economy. The Association of Finnish Cities and Municipalities considers sustainably-produced bioenergy to be necessary far into the next decade, since it is not possible to ensure weather-independent heat production in the next ten years without energy produced by burning some type of fuel. A future outlook should be created for the municipal biogas ecosystems and the investments made therein as part of sustainable energy production and use.  

Further information:
Vesa Peltola, Energy Adviser 

The renewal of the bioeconomy strategy is also linked to the vision for agriculture and food (initiative 34), especially as concerns the promotion of innovations. From a municipal perspective, the biostrategy objectives are linked to economic development in rural areas, the utilisation of the strengths of regional economic structures and, more widely, climate and environment targets. As far as agriculture is concerned, the aims of the strategy are the diversification of value chains, utilisation of material flows, strengthening of the position of primary producers in the value chain and the creation of new jobs in rural areas. 

The objectives include the promotion of bio-based and circular economy solutions and biotechnology.  

Further information:
Taina Väre, Senior Adviser 

1.9. Targeted Revision of the REACH Regulation (Initiative 18, Simplification) 

When implementing the REACH regulation, it is important to consider the clarity and predictability of the regulation.  Unambiguous and transparent regulation promotes industry investment planning and reduces the health and environmental hazards of chemicals.  

Measures to reduce the chemical load should be cost-effective, based on health effects and take into consideration their overall environmental impacts. Any chemical load that is hazardous to health and the environment should be reduced primarily by intervening at the source. 

Further information:
Kaisa Mäntynen, Senior Adviser 

1.9.1 Roadmap towards ending Russian energy imports (Initiative 19, Security) 

The Association of Finnish Cities and Municipalities considers the initiative good, but suspects the realisation may be difficult, especially when considering the reasonability of energy prices. The AFCM estimates that the use of fossil energy in Europe will not end for a long time. Accelerating the spread of small modular reactors by means of a European industrial alliance is an interesting idea. In any case, SMRs will probably not be of help before 2035. 

Further information:
Vesa Peltola, Energy Adviser 

9.1.2 Sustainable Transport Investment Plan (Initiative 20, Competitiveness) 

The Sustainable Transport Investment Plan is one of the cornerstones for competitiveness and clean industry in the Commission work programme. The aim is a sustainable transport system across borders and via different forms of transport.  

As per the Commission’s competitiveness compass initiative, the plan focuses on the production and distribution of low-carbon and renewable power, ports and marine industry as well as cross-border railway connections. The initiative is important and Finland must ensure its usability from the Finnish perspective as well.   

The content and form of the financial instruments for the Trans-European Transport Network (TEN-T) will be discussed as part of the EU’s new financial framework. The EU’s new financial framework should retain an instrument like the CEF (Connecting Europe Facility), which supports the implementation of tighter requirements, also in TEN-T urban nodes. 

EU regulation and financial instruments must take into account the particulars of the Member States and their accessibility and changes in the geopolitical situation. 

EU policy should promote the use of multimodal transport chains and mobility services as well as an increase in the share of public transport and other forms of sustainable mobility, such as utility cycling, in urban areas. Any regulation changes that weaken the legal basis (Regulation on public passenger transport services) and financial foundation for the organisation of urban public transport should be avoided. A key initiative linked to the topic is the Multimodal digital mobility services (MDMS) initiative that is in further preparation in the Commission. 

Urban regions play a decisive role in achieving transport emission reduction targets. The Commission is preparing sustainable urban mobility indicators for TEN-T urban nodes as per the TEN-T Regulation. The result should be a limited number of well-defined indicators that also support local and regional level targets. 

Further information:
Johanna Vilkuna, Development Manager